Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EST, Thursday, August 13,
2009. Sitting in cash. Mulling what to do. It's everyone's
big concern. Cash burns a hole. Put it "to work." (That's Wall
Street's mantra for making us broker.)
There is nothing better for our sanity than cash -- in our bank or in our mattress.
or (better image)
is no one knows where this is going. But everyone has an idea to push. Everyone
wants us to drink their Kool-Aid. The government wants us to think its policies
are working. BubbleVision (CNBC, etc.) wants us to feel good so we'll watch
and they'll sell ads. Brokers want us to love IPOs and secondaries for the high
fees -- higher than anything else they sell. Newsletter writers are preaching
whatever sells -- gloom and doom or boom and bust.
concept is simple: Put your cash in the safest place you can find. Gamble with
your day job. You can't gamble with both.
You can get a 2% one-year FDIC-insured CD at some banks. If you're in a high-tax
state -- all states will be high-tax soon (trust me) -- muni bonds make sense.
You should be able to earn 4% triple tax-free on a ten year bond. Which is over
7% pre-tax, and rising. 7% is far better than a slap in the belly with a cold
Harry, aren't interest rates likely to rise? Then the value of our bonds will
my thinking on interest rates: They're going to stay low for years and years.
The only reason the Fed raises interest is inflation. We're not going to have
inflation for years. Inflation happens when the economy is boiling; we're at
full employment; our factories are running three shifts. But real unemployment
today is running close to 20% in the U.S. And factory capacity is running around
70%. We've got a long way to go before things get frothy.
why try to predict this stuff? If you buy a 10-year muni bond that's paying
4% today, it will pay 4% tomorrow, and for the next ten years. Don't figure
on selling it. When it matures you'll get your money (or very close to it) back.
In short, you
will not win the game of predicting interest rates.
Here is this week's
FOMC Statement from the Federal Reserve. The Fed wants to boost the economy
by keeping interest rates low. It doesn't want to help you and I who have a
little cash. Don't be annoyed at them.. Accept their idiocy. Remember what a
wise old man once said (Kennedy?) -- Washington is 8 square miles surrounded
received since the Federal Open Market Committee met in June suggests that
economic activity is leveling out. Conditions in financial markets have improved
further in recent weeks. Household spending has continued to show signs of
stabilizing but remains constrained by ongoing job losses, sluggish income
growth, lower housing wealth, and tight credit. Businesses are still cutting
back on fixed investment and staffing but are making progress in bringing
inventory stocks into better alignment with sales. Although economic activity
is likely to remain weak for a time, the Committee continues to anticipate
that policy actions to stabilize financial markets and institutions, fiscal
and monetary stimulus, and market forces will contribute to a gradual resumption
of sustainable economic growth in a context of price stability.
The prices of
energy and other commodities have risen of late. However, substantial resource
slack is likely to dampen cost pressures, and the Committee expects that inflation
will remain subdued for some time.
In these circumstances,
the Federal Reserve will employ all available tools to promote economic recovery
and to preserve price stability. The Committee will maintain the target range
for the federal funds rate at 0 to 1/4 percent and continues to anticipate
that economic conditions are likely to warrant exceptionally low levels of
the federal funds rate for an extended period.
The Case-Shiller has been signalling an improvement in the second derivative
of housing prices for a few months, and in the latest report it even showed
a sequential increase. But check out the NAR's numbers for all of Q2. The year-over-year
drop in the median sales price of single-family homes showed its worst decline
ever. They didn't even have a second derivative gain improvement.
of the day: From Porter Stansberry, The S&A
a bizarro economy we're in... Economic activity and employment are still falling.
But money supply and total credit are soaring. Boiler-room type brokers are
buying $90 million mansions and hedge-fund managers are drinking $50 glasses
of champagne after work, like it's 1999. And despite weak demand, commodities
like copper, oil, and gold have remained at elevated levels. If we didn't know
better... we'd assume the Fed was printing money like crazy and shoving it into
the financial markets, hand over fist. Of course, we know that's exactly what's
happening. We just don't know how it will end. But we have a well-educated guess:
Fed is fighting aggressively to keep rates down and credit flowing (through
the purchase of fixed-income securities), its balance sheet has doubled to
over $2 trillion in the past year. It now has so many assets to manage, it's
hiring new traders lots of them. The Federal Reserve Bank of New York,
which implements monetary policy, is looking to increase its staff of traders
to 400, up from 240, by year's end. For those of you with a bit of time on
your hands, we suggest a research project. Do a correlation study between
the number of Federal Reserve employees and the corresponding decline in the
value of the dollar over the following period. We'd bet the two variables
are nearly perfectly correlated. ...
We promise to
stop talking about politics when the politicians stop trying to run the economy..
best time to own your own business is now:
1. Great employees are available.
2. You can buy busted businesses real cheap, and fix them up real quickly.
3. All the elements of successful new business are much cheaper now -- computers,
web sites, selling over the Internet, advertising, etc.
4. Customers want
to be loved. Today few businesses do a good job of loving their customers.
picks: STEC, EWA and EWZ are doing nicely. Thank you. I suspect that
GOOG, AAPL and GS will continue their inexorable climb. Having a little in GLD
is a good hedge. Don't gamble with this market. I can name you a whole bunch
of hedge fund managers who sold this market short and are presently looking
pretty bloody stupid.
played 1 1/2 hours of aggressive tennis yesterday. Much more satisfying than
suggestion site: Two Microsoft employees have created an online suggestion
box for you and I, hapless users. Click here.
There are no guarantees Microsoft is listening.
check your luggage: That's the overwhelming
lesson. Last year, more than 31 million bags -- around 1.4% of all checked luggage
-- arrived late. Roughly 1.8 million bags never arrived. For more, today's Wall
I hate my BlackBerry. Lately RIM's 5.0 synchronization
software has become specially awful. It won't transfer all my Outlook contacts
to my BlackBerry. It locks up. Verizon tech support is sweet, but basically
useless. RIM will only talk to God. I'm not God. Anyone got any solutions?
His request approved, the Channel 5 News photographer quickly used
a cell phone to call the local airport to charter a flight. He was told a twin-engine
plane would be waiting for him at the airport.
Arriving at the
airfield, he spotted a plane warming up outside a hanger. He jumped in with
his bag, slammed the door shut, and shouted, 'Let's go'. The pilot taxied out,
swung the plane into the wind and took off.
Once in the air,
the photographer instructed the pilot, 'Fly over the valley and make low passes
so I can take pictures of the fires on the hillsides.'
'Why?' asked the pilot. 'Because I'm a photographer for Channel 5 News,' he
responded. 'And I need to get some close up shots.'
The pilot was
strangely silent for a moment, finally he stammered, 'So, what you're telling
me, is. .. you're NOT my flight instructor?'
world -- Part 1:
The young man came running into the store and said to his buddy,
'Bubba, somebody just stole your pickup truck from the parking lot!' Bubba replied,
'Did you see who it was?'
The young man
answered, 'I couldn't tell, but I got his license number.'
world -- Part 2:
A Georgia State trooper pulled over a pickup on I- 75. The trooper asked, 'Got
The driver replied,
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.