In Search of the Perfect Investment

Tuesday, Las Vegas, Nevada:  I have a deal with the airlines. If I’m early, they’re late. If I’m late, they’re on time, and have left. Remarkably, I was early last night. The plane left on time and arrived a few minutes early. Which was remarkable, given it was 100% full with Hasidic Jews who dominate consumer electronics retailing in New York and can’t stop talking.

The Consumer Electronics Show opens in five hours. It features 150,000 poor souls in search of the latest hot product to peddle, and several hundred companies with new stuff and lots of huge smartphones, like this 6.1 inch monster from Huawei:

Samsung has a bunch of biggies also — including the Samsung Galaxy Note, which is 5.3 inch long. A tiny lady, buy-side Wall Street electronics analyst sitting next to me on the plane had one. It has huge pluses over my iPhone 5 — including the size of the type. A boon to someone sitting on a cramped, noisy plane  with tired eyes.

I received probably 500 emails from public relations people begging me to visit their company’s CES booth. I culled a bare handful that looked interesting, including Samsung, the Pebble watch, 3D TV and StickNFind, the guys who make the little thingee you attach your keys, your camera, etc. When you move 30 feet from your camera, your Bluetooth smartphone screams blue murder. And you know you’ve left the camera in the restaurant. Go back and get it. Neat idea. More on what I see tomorrow.

Australia is doing so well with its mines. The numbers are staggering. They pay unskilled kids $200,000 a year plus just to schlep boxes of supplies. The spot price of iron ore is over $140, an ultra-high figure which Rio Tinto says is “unsustainable.” But in the meantime, Rio and BHP shares should rise? Maybe yes. Maybe no. I read a long 80-page presentation on today’s mining business and all I could think of was Mark Twain’s wonderful quote:

 “A mine is a hole in the ground with a fool at the bottom and a crook at the top.”

I do like this chart. It tells you a lot about the mining business. It wasn’t just the banks that got hit by the 2008 financial crisis.

I spent two hours with Credit Suisse’s excellent 80-page mining charts and came away confused. The world’s economy is recovering. Demand for stuff like iron ore, nickel, lead and zinc must be improving. The shares of big miners, Rio and BHP, should be worth it… But … See if you can figure it. Here’s the presentation. Click here.

Meantime, here are the numbers the gold bugs like. This is the year-ending price for an ounce of gold.

2000 — $273.60
2001 — $279.00
2002 — $348.20
2003 — $416.10
2004 — $438.40
2005 — $518.90
2006 — $638.00
2007 — $838.00
2008 — $889.00
2009 — $1096.50
2010 — $1421.40
2011 — $1531.00
2012 — $1675.00

Though the price of gold increased for an unprecedented twelfth consecutive year, it was the first time since 2004 when the S&P 500 index (up 13%) outpaced gold. There are still goldies out there who think gold will reach $5,000 an ounce when Bernanke has finished printing dollars and has effectively bankrupted the U.S.

I have a small holding of SGOL. I don’t think it will buy the Porsche Primavera I’ve always wanted — and which Susan says is a car for people who don’t understand cars. Which sums me up perfectly. But it is definitely cute:

 Talking about banks. Matt Taibbi (yes, him) of Rolling Stone has written a long piece on banks and the bailout. His conclusion:

So what exactly did the bailout accomplish? It built a banking system that discriminates against community banks, makes Too Big to Fail banks even Too Bigger to Failier, increases risk, discourages sound business lending and punishes savings by making it even easier and more profitable to chase high-yield investments than to compete for small depositors. The bailout has also made lying on behalf of our biggest and most corrupt banks the official policy of the United States government. And if any one of those banks fails, it will cause another financial crisis, meaning we’re essentially wedded to that policy for the rest of eternity – or at least until the markets call our bluff, which could happen any minute now.

Other than that, the bailout was a smashing success.

This article is from the January 17th, 2013 issue of Rolling Stone. For the full article, which you will enjoy (whether you agree with it or not) is here.

Meantime, The Atlantic magazine has as the cover story on its January/February 2013 “What’s inside America’s banks. How Wall Street could blow up the U.S. economy — again.” Says the Atlantic:

At the heart of the problem is a worry about the accuracy of banks’ financial statements. Some of the questions are basic: How do banks account for loans? Can investors accurately assess the value of those loans? Others are far more complicated: What risks are posed by complex financial instruments, such as the ones that caused JPMorgan’s massive loss? The answers are supposed to be found in the publicly available quarterly and annual reports that banks file with the Securities and Exchange Commission.

The Financial Accounting Standards Board, an independent private-sector organization, governs the accounting in these filings. Don Young, currently an investment manager, was a board member from 2005 to 2008. “After serving on the board,” he recently told us, “I no longer trust bank accounting.”

To get some feeling for where the Atlantic is going, check out this week’s news headline:

U.S. reaches $8.5 billion settlement with 10 banks over foreclosure abuses

You can read the Atlantic’s gruesome piece here.

Google’s Chrome is fast, full-featured and probably the best browser. I forgot to mention Chrome in yesterday’s piece on Google. Get it. It’s free. Go to the top right and change some of its features. Allow it to complete your entry. It’s really fast and so well integrated with Google Search.

Harry Newton, who’s got jet lag. And is beginning to wonder why he’s in Vegas. Heck, the sun hasn’t come up yet and his Verizon hot spot isn’t 4G/LTE. It’s agonizing 3G, slower than the slowest DSL line. And his breakfast so far has consisted of dried apricots he schlepped from New York. The apricots are working a number on his tummy.