Harry Newton's In Search of The Perfect Investment
9:00 AM EST,
Thursday, November 20, 2008: Stockmarkets won't rise while thousands
of nice people are being fired, while no one is spending, while nearly every
company's earnings are contracting and while nearly everyone is redeeming their
hedge fund investments.
have not reached bottom. This is not time to predict bottom nor to catch
falling knives, nor to stand in front of speeding trains. As I've written often
(to the point of boredom) the only game is to sell short or buy puts.
But don't do it with more than 5% of your portfolio. Yesterday the stockmarket
fell a whopping 6% to 8% depending on which index you believe. Stocks
are at their lowest level in six years. The destruction of wealth continues.
for us. People are getting seriously scared. That's opening opportunities
for those of us who have a little cash. Try this scenario. Person A agrees to
buy apartment or building for $x million. Terms are agreed on. Contract is at
buyer's attorney. Buyer gets cold feet at the last moment and pulls out. Meantime
seller has committed the monies he's getting from the sale to another deal.
Seller is now in big trouble.
New buyer (one of us) steps in and offers cash and a fast close. What price
we buy this property at depends on the seller's desperation and our stubbornness.
number one rule with real estate is: The profit you make on real estate is directly
related to the price you pay. It's the only variable you can affect.
number two rule is don't fall in love with the property. Offer a low price.
Figure you have a one in ten shot at getting it. Don't bid higher to improve
your odds. There will a zillion opportunities in coming months. Cash is King.
Patience is God.
Holdings (OPY) is going lower.
got really serious problems. Here's The Boston Globe's story:
top securities regulator on Tuesday accused Oppenheimer & Co. of fraud
over the investment bank's sales of auction-rate securities to customers who
couldn't access their money after the market for the risky investments froze.
State William Galvin's administrative complaint also alleges Oppenheimer executives
and managers sold nearly $3 million in their own personal auction-rate securities
holdings within two weeks before the market's collapse last February, without
warning clients of growing risks amid a downturn in broader credit markets.
their clients, and their own advisers to those clients, in the dark, even
as they, themselves, got out of that tottering market," Galvin said.
& Co. -- a subsidiary of Oppenheimer Holdings Inc., whose shares fell
13 percent on Tuesday -- denied Galvin's allegations in a statement saying
the company "intends to vigorously defend itself."
sold auction-rate securities in the same manner as the entire brokerage industry
-- as a cash management tool similar to a money market fund," the New
York-based company said. "Oppenheimer and its executives, like dozens
of other 'downstream' brokerages nationwide, had no knowledge of the conduct
of the major institutions which caused the entire auction-rate securities
market to collapse."
his complaint was the first such action by a securities regulator against
a so-called "downstream" distributor -- a company which didn't directly
participate in the auctions as an underwriter, but sold the securities to
their own customers.
In its statement,
Oppenheimer acknowledged that "there were sales by executives of auction-rate
securities." But Oppenheimer added, "There were also executive purchases
during this period, and these same executives continue to hold millions of
dollars of auction-rate securities (a fact oddly omitted from the complaint)."
securities market involved investors buying and selling instruments that resembled
corporate debt, with interest rates that were reset at regular auctions, some
as frequently as once a week.
seeks to force Oppenheimer to pay back Massachusetts customers who put nearly
$56 million into the investments, and either are still holding them, or sold
them at losses.
said Tuesday it "continues to work with regulators and financing sources
to try to find a means for its clients to find liquidity from their auction-rate
also seeks to revoke the Massachusetts registration of Chairman and Chief
Executive Albert Lowenthal as an Oppenheimer broker-dealer agent.
alleges Lowenthal sold nearly $1.8 million in such securities two weeks before
auctions began to fail in February. The complaint also alleges Chief Operating
Officer Larry Spaulding sold $700,000; Greg White, director of Oppenheimer's
auction-rate securities department, sold $300,000 of his auction-rate securities,
and $100,000 of his wife's; and Louis Gelormino, an ARS desk supervisor and
senior vice president, sold $75,000.
seeks an order forcing some of the officials to pay fines in a complaint that
could come before a state administrative hearing officer in a process similar
to a judicial proceeding.
another downstream distributor, Boston-based Fidelity Investments, agreed
to buy back $300 million worth of auction-rate securities. It was the first
major retail brokerage to make such restitution. That agreement followed investigations,
but not complaints, by Galvin and New York Attorney General Andrew Cuomo.
Tens of thousands
of investors nationwide -- including institutional and individual investors,
cities and towns, charities and small businesses -- were left holding damaged
securities that couldn't be readily sold for cash once the $330 billion market
cratered, regulators say.
have reached settlements totaling more than $50 billion in buybacks of auction-rate
securities with companies including Citigroup Inc.; UBS AG; Morgan Stanley;
JPMorgan Chase & Co.; Wachovia Corp.; Merrill Lynch & Co.; Goldman
Sachs Group Inc.; Deutsche Bank; Credit Suisse Group; and Fidelity.
& Co. is unaffiliated with OppenheimerFunds Inc., an asset manager majority-owned
by MassMutual Financial Group.
Shares of Oppenheimer
& Co.'s parent, Oppenheimer Holdings, fell $1.67 to close at $11.68 after
sinking to a 52-week low of $11.13 earlier in the session. It has traded as
high as $49.38 over the past year.
Beer (courtesy Comedy Central)
Three hicks were
working on a telephone tower - Steve, Bruce and Jed. Steve falls off and is
As the ambulance
takes the body away, Bruce says, "Someone should go and tell his wife."
Jed says, "OK,
I'm pretty good at that sensitive stuff, I'll do it."
Two hours later,
he comes back carrying a case of beer.
Bruce says, "Where
did you get that, Jed?"
wife gave it to me," Jed replies.
you told the lady her husband was dead and she gave you beer?"
Well, not exactly",
Jed says. "When she answered the door, I said to her, 'You must be Steve's
She said, "No,
I'm not a widow!"
And I said, "I'll
bet you a case of Budweiser you are."
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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