In Search of the Perfect Investment

We had our first meeting of investors yesterday. Most agreed with my 13-step Investment philosophy for today’s times. (Click here.) There were some themes:

+ Capital preservation is our obsession.

+ The abundance of opportunities in America, especially in real estate and especially if you can pay cash.

+ The dearth of good money managers.

+ The issues of time and “gotchas.” We know the perils of our own industry. Heck, we’ve been in it for eons. But figuring the gotchas of passive investments is very very difficult and often takes more time than most of us have.

+ Give money to your kids now. There’s a window of $5 million  to December 30, 2012.  (Need to do more research on this one.)

Among the best investment of recent years: Rhinoceros horn cups. A few years ago, you could buy them for $3,500. Now they fetch $500,000. They grind them down and use the horn as a aphrodisiac.

Among the worst art investments of recent years: Japanese art. Much has come onto market recently, as  Japanese stock market has flagged.

My friend who knows tells me the Antique Road TV Show is not only popular but accurate on pricing.

2011 is proving exceptionally difficult. From today’s Bloomberg:

Paulson Said to Cut Risk in Main Hedge Funds

John Paulson, the billionaire hedge- fund manager having his worst year, is cutting risk in his hedge funds further as the European sovereign-debt crisis roils markets, according to two people briefed on the matter.

New York-based Paulson & Co., which has $28 billion in assets, has cut the so-called net exposure in its main hedge funds to 30 percent, Paulson told investors on Nov. 14, according to the people, who asked not to be identified because the company is private. It was 60 percent about four months ago.

The firm is reducing its bullish bets across all funds until there is more certainty that Europe can contain its debt crisis, Paulson said at the Metropolitan Museum of Art in New York, part of a two-day annual meeting for investors. Paulson’s biggest funds, Advantage Plus and Advantage, which have $11 billion in combined assets and aim to profit from corporate events such as takeovers and bankruptcies, fell 44 percent and 29 percent this year through October, respectively.

His Recovery Fund, which invests in assets Paulson believes will benefit from a long-term economic upturn, slumped 25 percent in 2011.

Armel Leslie, a spokesman for Paulson, declined to comment on the annual meeting.

Net exposure is calculated by subtracting the percentage of a hedge fund’s short positions, or bets on falling securities, from its longs, or wagers on rising stocks and bonds. Paulson said on a conference call with investors in July that he had cut bullish investments to 60 percent from 81 percent and may pare risk further. Citigroup, Sino-Forest

Paulson, 55, has been betting on an economic recovery by the end of 2012, fueling his bullishness on U.S. banking stocks that contributed to this year’s losses.

Citigroup Inc. (C), Paulson’s fifth-largest stock holding in the third quarter, according to data compiled by Bloomberg, fell 41 percent this year through yesterday. The firm sold about 8.4 million shares of New York-based Citigroup last quarter, according to a regulatory filing. Bank of America Corp., the firm’s 12th-largest stock position, slumped 54 percent in 2011. Paulson added 3.88 million shares of Charlotte, North Carolina- based Bank of America last quarter.

Paulson lost $468 million in June on Sino-Forest Corp. (TRE), the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. The hedge fund, previously the largest investor in the stock, sold the entire stake that month after Sino-Forest shares plunged 71 percent in two days.

The firm received less than 8 percent in year-end redemption requests for all its funds by the end of last month, which means withdrawal orders totaled about $2 billion.

Clients were permitted to pull a maximum of 25 percent of assets, or about $7 billion. Paulson and his employees account for about half of the firm’s capital.

Hedge funds declined 2.9 percent this year through Oct. 31, based on Bloomberg’s aggregate index, as global stocks tumbled amid a worsening European debt crisis and the threat of a U.S. recession. The MSCI All-Country World Index of global stocks fell 3.9 percent, including reinvested dividends.

MF Global is more than disgusting. It’s seriously disturbing. Try my thinking on this:

MF Global is the most important financial story in decades.

If a brokerage firm (dealing in commodities, stocks or bonds) can calmly help itself to its  customers’ money, then no investor will feel comfortable leaving their money with Fidelity, Schwab, Merrill Lynch,  Morgan Stanley or Goldman Sachs,  etc.

I personally have accounts at several brokerage firms.

Though they’re “insured,” I’m scared to death that one  might do an MF Global and take my money for their own purposes — for foreign exchange, sovereign debt gambling, or to pay their bills. Whatever.

This is really scary.

I’m no longer staring at risks I can understand. The market goes down. My stocks and bonds fall  10% or 20%.

I’m now  staring at 100% loss of my money.

Right now — as far as I can tell — MF Global has not returned one nickel of any customers’ brokerage accounts. It’s frozen. Imagine you have your life savings in an account at Morgans or Goldmans. One day you wake up to find all your cash monies, all your stocks, all your bonds locked — not accessible. You can’t even get to the cash you had in a miserable money market fund because you were increasingly afraid of equities.

If my fear becomes common, then everyone in the U.S. and abroad will sell all their stocks and bonds, take their money out of brokerage firms. There wi’ll be  gigantic run. And American financial markets will be destroyed.

Tell me that someone other than me is worrying about this.

Europe is headed for a recession. Government austerity and eurozone uncertainty are the driving factors.

CHECK. CHECK. CHECK. My oldest (and most effective)  motto.

+ Check that the travel agent booked the right flight — not the one a month in advance.

+ Check that the theater starts at 7:30 PM, not 8:00 PM, its usual time.

+ Check that when AT&T’s PR person says “Go to the store, they have your new phone.” they actually do have it. (They didn’t.)

Matt Taibbi’s latest Rolling Stone article.

How I Stopped Worrying and Learned to Love the OWS Protests
Much more than a movement against big banks, they’re a rejection of what our society has become.

Click here.

They sent my Tax Return back! AGAIN!
In response to the question: “List all my dependents?” I had written:

+ 12 million illegal immigrants;
+ 3 million crack heads;
+ 42 million unemployable people on food stamps,
+ 2 million people in over 243 prisons;
+ Half of Mexico ; and
+ 535 fools in the U.S. House and Senate.

Apparently, this was NOT an acceptable answer.

Sometimes the Borowitz Report hits it.

Startled Deer Becomes New Republican Frontrunner
Inability to Speak Considered a Plus

CONCORD, NH (The Borowitz Report) – The race for the Republican presidential nomination took an unexpected turn today as a new poll showed that a startled deer was the new GOP frontrunner.

Bucky, the red deer who is the first choice of likely Republican voters is believed to be the first woodland creature ever to lead a major party’s presidential field.

“Voters like what they see in Bucky,” said veteran political strategist Ed Rollins, who has signed on to helm the red deer’s primary campaign.  “The fact that he is unable to speak is a major asset.”

In his first appearance in Concord, New Hampshire, however, the antlered candidate garnered mixed reviews for what some observers said was an unsteady performance.

Appearing frightened by the TV lights, Bucky kicked over the podium and then pranced down the hall before being subdued by a tranquilizer dart.

“Clearly he’s a little rough around the edges,” said Mr. Rollins.  “But he still did better than Herman Cain.”

It was another rough day for Mr. Cain, who offered this response to a reporter’s question: “For the last time, I did not touch her down there.  Oh wait, did you say `Libya?'”

Gov. Rick Perry also stumbled badly in a campaign appearance in Iowa, telling supporters, “If I am elected, I will find out where Iran’s nuclear weapons are.  Also, where Iran is.”

Meanwhile, former House Speaker Newt Gingrich predicted that his recent rise in the polls is not a fluke: “The American people want an adult, and no one has a stronger record of adultery than I do.”

You can receive your very own Andy Borowitz daily funny — click here.

Harry Newton who believes happiness is your own toilet — one you’re allowed to leave the toilet seat up.

For those who do not know what a bucket seat is…

It’s the ninth seat on a motorcycle. I’ve never seen this. I saw six on a motorcycle in Vietnam, but not nine.  This is a huge feat, given that the engine is probably no larger than 150 cc.