In Search of the Perfect Investment

That first act was our own business. We were active 24/7. We controlled it. It won the Emmy, the Oscar and every other award.

The second act — investing our own money — is passive, under some other schmuck’s control and is  way off Broadway.

We’ve gone from active (big fun, huge excitement) to passive (out of our control, total frustration).

Now in our second act, and you’ll need to adopt a  stress-reducing strategy, e.g.  fewer equities,  fewer structured investments, more bonds. More liquidity.  think sleeping at night. Keep reading.

You can give $5 million to each kid. At least until end December next year. There is BIG urgency because there is talk of this “window” being closed earlier by our friends in Congress.  This $10 million giveaway (5 per spouse) avoids federal taxes. There are also ways around state estate taxes, including “moving” to Nevada (and other places) which have limited residency requirements. Some states even allow you to set up trusts from which you can pull money back. New York is the only state that counts days of residency. California has the 51% rule as measured in days. This is all very complicated but worth pursuing because:

+ The windows is presently open, and closing fast.

+ Income tax rates are going up — federally and locally.

+ Given how irresponsible our governments are acting, do you really want them to have more money to fret  away? Just think, they could use your money to finance another Solyndra!

One Huge Reason The Stock Market Isn’t Cheap…From Naufal Sanaullah’s latest market overview, this chart from TheChartStore.com shows (obviously) how many hours you have to work to buy the S&P. While obviously this measure has improved compared to recent peaks, it’s still WELL above historical standards. Some combination of a falling market or more robust wages is needed to get the number back into line.

Two reasons not to like silver: This year’s “action.”

One reason to stay away from natural gas.

“And one day interest rates will rise, so buy the TBT” has been the mantra for the past five years..

Only gold has looked a little better, though it has become very squirrely of late:

Of, and by the way, the Euro is a great short. It has been so for while. It’s going to par with the dollar. But it hasn’t. It stays up.

I know everything about publishing (Act 1) but I know nothing about trading currencies, interest rates, natural gas, silver or most equities. I’m in Act 2. Gold futures are down again today. But bank stock futures are up. This makes absolutely no sense.

MF Global is a disaster, but not for all of us. Maybe. Commodities brokerage accounts are not insured. Your and my stock and bond brokerage accounts at places like Fidelity and Merrill Lynch are insured. If one of these places went broke, we’d probably get our monies back. Apparently everyone who had brokerage accounts at Lehman Bros. got their money back in full.

But if you are a farmer hedging your corn crop with MF Global, you’re screwed. Your monies (or what’s left of them) are mingled with what’s left of the company’s monies. And they’re all sitting with the court-appointed trustee who has a major incentive — his fees — to dither around forever.

There is a saying in the divorce business  that a divorce is settled between the two lawyers when the legal fees have equaled the assets remaining, i.e. zero.

As my lawyer friend said yesterday, “the trustee will milk MF Global assets dry, just as he did with Lehman Brothers, where his legal fees were around like $180 million.”

I believe if you trade currencies, those accounts are also not insured. If something happens to your currency brokerage  firm you’re screwed.

I don’t know what other accounts are, or are not insured. It doesn’t hurt to ask. Remember my mantra — CHECK. CHECK. CHECK. And it doesn’t hurt to spread your money around different brokerages.

I don’t trust no one. Corzine, the genius, borrowed 40 times his equity. Personally I don’t like borrowing. I have only borrowed once in my life — to buy a building the company needed. I paid it off a year later when I realized I couldn’t earn with investments what the bank was charging me in interest.

Competition is actually heating up in the cable TV and satellite TV business. The big news is that you can get a free DVR from most of your providers. This DVR allows you to record your favorite shows and watch them later on any cable box-connected TV in your house. This is actually quite useful.

The clock is ticking in Europe. The PIGS are floating bonds to pay their upcoming bills. The price of these bonds is skyrocketing. Soon they won’t find anyone to buy the bonds (i.e. lend them the money). Then they’ll be in real trouble. Traditionally countries can’t default. They just print money — if they can. But the PIGS can’t. Someone else prints euros. The only solution is for something called the ECB (The European equivalent of our Fed) to print the money and buy the bonds. But the European Central Bank (ECB) is reluctant because the disciplined Germans don’t want to bail out the undisciplined Greeks, Italians, French, etc.

This will blow up before Christmas into a major crisis for all of us. Now is not a good time to be in equities.

Harry Newton who finds exercise of all sorts (i.e. tennis) to be the ultimate stress reducer.