In Search of the Perfect Investment

Today, there are two types of stocks —

1. The “momentum” stocks which are being propelled into the ionosphere by emotion, publicity, hype, BubbleVision and a belief that what goes up must continue to go up. How else to explain this  insanity:

 

2. The others. They derive their value from things like profits, earnings, dividends, etc.

You need to hold both.

My list is on the right.

 Trip’s CEO is on CNBC (aka BubbleVision) at 10:30 AM this morning.

Some trading “platforms” — like Fidelity’s Active Trader Pro — don’t include all your holdings. They exclude bonds, some mutual funds, etc. Their online web site includes all. I don’t know why they exclude some holdings. It’s very annoying. I don’t know about other services like Schwab and TD Amertrade, etc.

Some of you did not read yesterday’s column. My web hoster’s server screwed up. I think I got it fixed. Yesterday I ran an excerpt from Warren Buffett’s upcoming annual report letter. That letter contained (the best part):

I (Warren Buffett) tell these tales to illustrate certain fundamentals of investing:

+ You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”

+ Focus on the future productivity of the asset you are considering. If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn’t necessary; you only need to understand the actions you undertake.

+ If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.

+ With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field — not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.

+ Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle’s scathing comment: “You don’t know how easy this game is until you get into that broadcasting booth.”)

You can read yesterday’s entire column (which contained my favorite momentum stocks) here.

Bitcoin hits a bump. Bitcoin is money made inside a computer. Send me $1,000 and I’ll give you 2,348 Harry’s Dollars. If people keep sending me money, I’ll increase the “value” of Harry’s Dollars. That will entice you to send me more money. Have you heard about Mr. Ponzi?

When I’ve got enough of your money, I’ll close my computer, take all the money and leave for some place warm, like Australia.

That pretty well sums up what happened with Bitcoin and why I never wrote about it. It turns out most Bitcoin was on a computer called Mt. Gox, which was once somewhere in Japan and may, or may not still be there. Probably not.

Some of you got this idiotic error message, when you went to this web site yesterday.

My simple explanation: Like most smaller web site, mine shares a computer (also called a server) with other web sites. That keeps my monthly fees down, and my problems high. My cheap web hoster limits my simultaneous “processes” arbitrarily to 20. A process is something going on — probably one of the “plug-ins” I installed. The web hoster doesn’t explain what a process actually is. And reports from WordPress (the platform I use) are equally vague.

In the last few days, I have progressively shut down plug-ins, to no avail. Finally I shut down the stock quote column on the right. That plug-in required my web site talking to Yahoo Finance constantly — to update the stock prices. I’ve replaced Yahoo prices with a simple list which requires no updating and no “processes.” The site should work better now. I’ve also removed the dark grey background which many of you were getting on emails of my daily column.

There are some lessons here:

+ There’s some great software, but you can rarely use it straight out of the box. You need to tweak it. That means that you — the boss — have to understand enough technically to be dangerous.

+ Instructions you give to software programmers need to be ultra-precise. You can’t say “make the type bigger.” You have to say make it 14 point. You have to also specify the type face, like Helvetica or Times Roman.

+ IT professionals are like architects. Using your money, they want to build the most glorious web site in the entire world. It’s their Taj Mahal. If you let them do it, they’ll be famous, and you’ll be broke.

+ Web sites don’t take as long to get up and running as your web site designers claim. They believe that the longer they can spin it out, the more they can charge you. If I can get a new web site posted every morning, they can certainly get your web site up and running in a few days.

+ Videos look great on web sites. But many of your customers don’t have the Internet speed to view them easily. They will get those endless rotating circles, forcing them to wait forever until they lose interest in what you’re selling. Put your videos on YouTube and link to them there. Do not put videos on your site — even small ones — that require your customers to use Adobe’s FlashPlayer — which has the distinction of being the most buggy software ever written. Steve Jobs hated it, with reason.

Favorite New Yorker cartoons this week:

 
Harry Newton who warns the “cloud” is so unreliable, you need to constantly hit the SAVE button. Do it every minute, every time you make a change. You can also set most software up to “auto-save” every minute or so. Most software with auto-save does it every ten minutes. That’s far too long.

Susan is binge-watching True Detective via Roku from HBOGo. She loves it. Roku is small, portable and doing an IPO soon. It will be hot.

Every email you receive is spam. Well, not every one. But unless you recognize the sender, the email probably is spam. Free Amazon rewards, your appointment to the Whos Who,  an immediate eviction, a cheap mortgage, a fast $1,500 loan, a new job, a reduction in my non-existent student loans … all (and more) are spam. Don’t open them. Don’t respond to them. Delete them immediately, if not sooner.

It was 27 in Central Park when I walked Rosie last night. The snow was hard and frozen. This morning in New York, it’s snowing. Please send me your money. Harry’s Dollars are really safe. I need to go to some place warm. My need is urgent.