Harry Newton's In Search of The Perfect Investment, Technology Investor. Harry Newton
AM EDT, Thursday, October 29, 2009: They're
shorting. They're buying puts. The "smart money." That's who. Their
favorite vehicle is the S&P500. There are at least three ways of doing this
-- the SH, the SDS (two times leverage) and SPXU (three times leverage). Lately,
all three have been skyrocketing. I don't trust the leveraged ones. Past study
of them suggests they suck. That's a technical term. The leveraged ones promise
the world, deliver for a few days, then suddenly go awry. That's because they
get rebalanced every day -- a process I don't understand. I figure if I don't
understand it, I don't want it. Still, their recent charts are interesting:
These charts actually
show what you'd expect short-term. The threefold one (SPXU) has recently done
three times better than the single one (SH). The SPXU is up 16% since October
21. The SH is about about 5.2%. So, it is threefold, at least for these last
seven days. Go figure.
business of making "calls" on the market -- i.e. picking when it's
going to change directions -- is a total mug's game. Stick with Harry's 15%
Of course, that
hasn't stopped me making a call a few days ago -- saying lighten up. And of
course, today's market will probably skyrocket, if only to spite me. Stick with
Harry's 15% rules.
long-term case for gold. From Richard Russell yesterday:
Within a few
weeks or months, the Obama administration will have Congress boost the $12.1
trillion debt ceiling. Over the next decade, budget deficits will add a total
of $9 trillion. Experts say the real deficit will actually be higher by $4
trillion. Already, with today's low interest rates the interest or cost of
servicing the debt is almost $500 million a day. In ten years the US national
debt will be around $20 trillion. There's no way that $20 trillion can be
carried or financed -- probably with substantially higher interest rates.
In 2009, federal
receipts declined 16.6%. In order to deal with the rising debt problem, taxpayers
will face higher taxes or massive spending cuts or both. The American people
are not stupid. They see the approaching problems, and they are pessimistic
about the future of the country. They fear for their children and their grandchildren.
At some point,
our foreign creditors will stop buying US debt. The US will no longer be an
AAA-rated risk. At that point or before, the dollar will lose its reserve
status and nations all over the world will move to unload or diversify out
of dollars. At present, dollars make up a large percentage of every nation's
reserves. Nations will move to protect the purchasing power of their reserves,
which will mean moving away from dollars. If the dollar is distrusted, all
fiat currency will be distrusted since almost all fiat currency is backed
in part by dollars.
At some point
the word "fiat currency" will become a dirty word. Before that happens,
investors will be panicking to gold as a store of value. This is the rationale
for holding gold over the long term. What happens to gold now is incidental.
It's the long-term that is important. Until then, gold may fluctuate foolishly
with the international level of the dollar.
happened to the banking business? I asked an investment banker friend.
Here's his answer yesterday:
When we all
had skin in the game, risk (traders, arbs, etc) was watched/controlled more
carefully. No clawback was necessary as it was automatic. When OPM (other
peoples money) was plentiful (it still is), all bets were placed and
doubled and doubled and doubled again until the final curtain. Commercial
bankers combined with public money, just don't understand the risk, let alone
being able to control it. Their penis envy (trading is more profitable allegedly
than normal bank lending) finally persuaded Clinton/Rubin to tear down the
Glass-Steagall curtain and all hell broke loose. Today most full-line investment
banks are run by traders. The inmates are running the asylums. Glass-Steagall
(which kept commercial and investment banks separate) needs to be brought
back. The net capital rule needs to be re-instated as well (10:1?). Those
actions will control these lunatics, to an extent.
ever lend any money to any of your friends.
Even if you eventually get it back, the hassle will not be worth it. The hassle
consists of harassing them for payment, keeping track of their always-late and
always-skimpy payments, working up payment schedules which they constantly violate.
Every promise they make will be BS And worst, when it's all over, you'll rarely
get a "thank you." You'll rue the day you agreed to give them the
future: say NO. Don't give a reason. Or, if you wish, "it's not something
I can do, sorry." Better to have a friend than a debtor.
with Google. A Google researcher called me
yesterday for my thoughts on Google products. He listened for 15 minutes, took
notes, asked intelligent questions and even agreed with some of my suggestions.
In contrast, Microsoft doesn't return phone calls or answer letters.
Docs and Google Gears will ultimately eat Microsoft's Office. My brilliant son
Michael told me yesterday he had almost moved fully away from Microsoft Office.
He loved Google calendar -- and its ability to be easily shared.
I envy him. I'm still on Outlook and would love to share my calendar with Susan,
my wife. But I can't. Ironically, Microsoft had that feature in an earlier version
of Outlook (before Office 2003), but took it out, for reasons I'll never understand
-- and despite many users' complaints.
clocks have a mind of their own. Especially
those controlled by computers. Items:
Outlook on my PC arbitrarily changed some (not all) of my appointments by adding
an hour -- making them an hour later and me late. I don't know why Outlook did
this because my computer showed the right time. I think Outlook gets confused
by, amongst other things, daylight savings time.
I have two wireless clocks that "automatically" change for daylight
savings time. What triggers them is some government wireless signal from Colorado,
or wherever. This weekend, one changed, but not the other. This idiocy made
me one hour late for another appointment. I now rely on my $15 Timex.
savings time had its benefits once upon a time. But since Congress started making
changes.... don't get me started.
I threw out all my wireless clocks.
Doctor Dave had slept with one of his patients and felt guilty all
day long. No matter how much he tried to forget about it, he couldn't. The guilt
and sense of betrayal were overwhelming.
But every now
and then he'd hear an internal reassuring voice in his head that said:
worry about it. You aren't the first medical practitioner to sleep with one
of their patients and you won't be the last. And you're single. Just let it
another voice in his head would bring him back to reality.
..........you're a vet.
a wonderful life.
In the past two weeks -- four visits to various dentists, one to a dermatologist,
one to an ear doctor and soon one to an eye doctor and a GP for flu shots. It's
ultra-boring, and painful. But I'm glad I've taken the time. You should too.
You'll be surprised what they found.
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 .
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