In Search of the Perfect Investment

Weekend stuff:

+ The New York Times led its SundayReview section:

MY mother received the ransomnote on the Tuesday before Thanksgiving. It popped up on her computer screen soon after she’d discovered that all of her files had been locked. “Your files are encrypted,” it announced. “To get the key to decrypt files you have to pay 500 USD.” If my mother failed to pay within a week, the price would go up to $1,000. After that, her decryption key would be destroyed and any chance of accessing the 5,726 files on her PC — all of her data — would be lost forever.

The upshot: she paid the $500 ransom and got her files back. What she should have done:

+ She should have backed up her files regularly. (I’ve nagged on this regularly.) See the Apricorn drive on the right.

+ She should never have opened an email attachment or gone to a fishy web site. Remember, reputable businesses like credit card companies and banks will never send you an attachment. If you get one, it’s fishy.

You can read the full piece here.

+ A broker charged me  a $95 “account maintenance fee” for receiving a distribution from an old private equity fund. I said “drop the charge.” They did. Banks and brokers are creating fantastic new fees. Watch out for them. Check your statements. Question them.

+ Tighter the screws on your glasses. My lens fell out and I had to play tennis with my computer glasses. I was hopeless. I felt like an idiot and played like one.

+ My Microsoft Outlook went screwy on me. Stuff happens on computers. Fortunately, I had “saved my settings.” I restored my settings and was back in business. TODAY: If you’re using Microsoft Office, run “Save My Settings” now. You can find the software under Microsoft Office Tools. Save your settings does not save your email addresses, POP, SMTP and passwords correctly. So copy them on paper somewhere.

+ AirBnB can be great and it can suck. For my children, it sucked. They rented two apartments in Houston last week. One was filthy. The owner had not delivered the children stuff he had promised (and paid a rent on).

+Don’t do stupid. Don’t pack heavy. And don’t pick up heavy bags. Pay the porter $5. Your back is worth $5.

+ The Economist’s weekend cover:

The piece begins:

Most engrossing piece in eons. It begins:

HANDY is creating a big business out of small jobs. The company finds its customers self-employed home-helps available in the right place and at the right time. All the householder needs is a credit card and a phone equipped with Handy’s app, and everything from spring cleaning to flat-pack-furniture assembly gets taken care of by “service pros” who earn an average of $18 an hour. The company, which provides its service in 29 of the biggest cities in the United States, as well as Toronto, Vancouver and six British cities, now has 5,000 workers on its books; it says most choose to work between five hours and 35 hours a week, and that the 20% doing most earn $2,500 a month. The company has 200 full-time employees. Founded in 2011, it has raised $40m in venture capital.

Handy is one of a large number of startups built around systems which match jobs with independent contractors on the fly, and thus supply labour and services on demand. In San Francisco-which is, with New York, Handy’s hometown, ground zero for this on-demand economy-young professionals who work for Google and Facebook can use the apps on their phones to get their apartments cleaned by Handy or Homejoy; their groceries bought and delivered by Instacart; their clothes washed by Washio and their flowers delivered by BloomThat. Fancy Hands will provide them with personal assistants who can book trips or negotiate with the cable company. TaskRabbit will send somebody out to pick up a last-minute gift and Shyp will gift-wrap and deliver it. SpoonRocket will deliver a restaurant-quality meal to the door within ten minutes.

The piece told me:

+ I should be using these services much more than I do. There are far more of them than I’d ever dreamed. They’d save me a lot of time and let me be far more productive. (Whatever that means.)

+ There are huge opportunities still for starting and funding new apps.

You can (and should read the entire piece). Click here.

Whatever happened to Motorola?

It invented the cellphone. It was arguably the most creative tech company ever. Yet it fell apart. Here’s an absolutely fascinating piece from a Chicago paper. Read it. Click here.

Now to last Friday’s column (annotated and expanded):

I’m guessing most of my readers didn’t read last Friday, since they were in Zermatt skiing or Boca sunning themselves. Me? (I was enjoying 20 degree weather and playing tennis indoors at the Old Chatham Tennis Club in mid-state New York.

Exhibit A:

We got the top two — see list on right.

The S&P 500 rose around 13.7%, including dividends — which the Vanguard S&P 500 Index Fund (VFIAX) reflected, but the actual index as reported on BubbleVision and in the press didn’t. It doesn’t include dividends.

My results show I’m up 3.65% — but that reflects my strange method of accounting, namely that’s after paying my family’s expenses and not up-valuing any rise in real estate assets or shares in private companies I own. I do write off the ones that become worthless.

Bloomberg did a piece on The Best and Worst Investments of 2014. Fascinating results:

 U.S. Large-Cap Stocks

Best: Skyworks Solutions (SWKS), +156 percent

Worst: Sprint Corp. (S), -61 percent

Semiconductor company Skyworks Solutions makes the components in mobile phones and other devices that connect them to wireless Internet. Last quarter, its sales were up 51 percent year-over-year. If you’d invested $10,000 on Jan. 1, it would be worth $25,630 today.

To hold onto subscribers, Sprint has aggressively cut prices on its mobile phone service. It reported a profit in just one of the past four quarters. If you’d invested $10,000 on Jan. 1, it would be worth $3,870 today.

Criteria: Of 493 stocks on U.S. exchanges with market capitalizations of more than $10 billion.

 International Stocks

Best: Hanergy Thin Film Power Group (566 HK), +249 percent

Worst: Arrium Limited (ARI AU), -89 percent

By buying up three U.S. and one German solar companies, the Hong Kong-based Hanergy is positioning itself as a leading maker of thin-film solar panels. If you’d invested $10,000 on Jan. 1, it would be worth $34,892 today.

The drop in global commodity prices hit Australia’s mining industry hard. Arrium’s 89 percent drop this year follows its 92 percent rise in 2013. If you’d invested $10,000 on Jan. 1, it would be worth $1,110 today.

Criteria: Of non-U.S. companies in the 3,017-stock FTSE All World Index, which includes developed and emerging markets. Excluded are stocks that didn’t trade the entire year, and those under the majority control of a holding company.

 Equity Mutual Funds

Best: Matthews India Fund (MINDX), +59 percent

Worst: Fidelity Select Energy Service Porfolio (FSESX), -22 percent

India elected a new prime minister in May, and its main stock index jumped 30 percent this year. Matthews’ top holding was Emami Ltd. (HMN), a maker beauty and health care products that’s up 57 percent year-to-date. If you’d invested $10,000 in MINDX on Jan. 1, it would be worth $15,920 today.

The Fidelity portfolio of energy service stocks suffered, along with many other energy sector funds, in a year that the price of a barrel of oil went from $111 to $59 in six months. If you’d invested $10,000 in FSESX on Jan. 1, it would be worth $7,810 today.

Criteria: Of 1,441 U.S.-based equity mutual funds with assets of $500 million or more. Excluded are closed-end funds and those that rely on leverage.

 Small-Cap Stock Funds

Best: William Blair Emerging Markets Small Cap Growth Fund (WESNX), +12.6 percent

Worst: Pacific Advisors Small Cap Value Fund (PASMX), -23 percent

Small-cap stocks struggled to repeat their outstanding performance in 2012 and 2013, when the Russell 2000 index rose 57 percent. Still, about two of every three small-cap funds are up for the year. If you’d invested $10,000 on Jan. 1 in WESNX, it would be worth $11,260 today. But $10,000 in PASMX would have turned into $7,663.

Criteria: Of 336 U.S.-based small-cap equity mutual funds with assets of at least $100 million and a median holding market capitalization of less than $3 billion. Excluded are closed-end funds and those that rely on leverage.

 Bond Funds

Best: Vanguard Extended Duration Treasury Index Fund (VEDTX), +45 percent

Worst: AllianceBernstein All Market Real Return Portfolio (ACMTX), -11 percent

Vanguard’s index fund invests in U.S. government bonds that don’t mature for 20 to 30 years. They did well in 2014, reflecting expectations that inflation will remain low for quite a while. If you’d invested $10,000 in VEDTX on Jan. 1, it would be worth $14,506 today.

The AllianceBernstein fund is classified by Bloomberg as a fixed-income fund because its main goal is inflation protection. But while its top holding was Treasury Inflation-Protected Securities, or TIPS, its other largest positions were equity shares of energy companies, which were hit hard by oil’s drop. If you’d invested $10,000 in ACMTX on Jan. 1, it would be worth $8,852 today.

Criteria: Of 776 open-ended fixed income mutual funds based in the U.S. with assets of $500 million or more.

 Commodities

Best: Coffee, +58 percent

Worst: Brent Crude Oil, -45 percent

Coffee prices soared after drought in Brazil, the world’s largest grower and exporter of coffee beans. It was one of the few commodities that rose as world economic growth slowed, especially in Europe and emerging markets. Oil’s slide was exacerbated by decisions by OPEC and Saudi Arabia not to cut production.

Criteria: Of 18 global commodities tracked by Bloomberg.

 Exchange-Traded Funds

Best: First Trust NYSE Arca Biotechnology Index Fund (FBT), +52 percent

Worst: Market Vectors Russia Small-Cap ETF (RSXJ), -52 percent

Biotech companies were popular with investors in 2014. The First Trust fund’s top holding was Incyte Corp., which primarily makes oncology drugs and is up 52 percent this year. If you’d invested $10,000 in FBT on Jan. 1, it would be worth $15,221 today.

Sanctions and the plunging price of oil put the Russian economy on life support. If you’d invested $10,000 in RSXJ on Jan. 1, it would be worth $4,793 today.

Criteria: Of 1,269 U.S.-based exchange-traded funds. Excluded are exchange-traded notes and ETFs that use leverage.

 Currency

Best: The U.S. Dollar

Worst: The Russian Ruble — or Bitcoin

Every major currency fell against the U.S. dollar in 2014. The euro dropped 11 percent, the Japanese Yen fell almost 12 percent and the British pound dropped 5.6 percent. Of non-U.S. currencies, the Indian Rupee did best, down 2.4 percent against the dollar.

Russia’s central bank raised a key interest rate to 17 percent on Dec. 16, and even that failed to stop the Russian currency’s plunge. The Ruble is ending 2014 down 45 percent against the dollar, shrinking a $10,000 investment on Jan. 1 into $5,513.

But there’s one currency that did worse in 2014, depending on whether you think virtual currencies are real money. A bitcoin has lost 58 percent of its value in U.S. dollars this year, and 72 percent since last November. If you’d invested $10,000 in bitcoin at the beginning of 2014, it would be worth $4,202 today.

What can learn from 2014 (and a plug for MotifInvesting).

To me, the biggest lesson  is I need better ideas. I’m not finding them in all the places I’ve been looking.

Enter Motif Investing, a two-year old online broker/web site with an interesting idea: buy baskets of stocks based on “themes.” Motifs” are groups of up to 30 securities – usually researched and assembled by Motif staff – that are arranged around a theme, like small-cap stocks or companies involved with elder care. The firm also offers a selection of fixed-income motifs, like Corporate Bonds and California Munis. There are almost 100 motifs to choose from (but more are being added by users) and you can trade each for only $9.95, as much as one stock trade with a firm like E*Trade. You can trade stocks in and out of your Motif portfolio for only $4.95.

I signed up yesterday. Singing up is free. I haven’t funded my account, yet. I’m still mulling the site. Their idea is brilliant — perhaps the first major breakthrough in investing, since ETFs. It’s like owning an ETF you can add or kick out stocks, which you can’t do with an ETF.

The site is MotifInvesting. There’s a user review on NerdWallet.

Please check them out. This is a “find.”

Here’s a clip from the site:

I plan on checking them out seriously this week. I’m hoping to get an interview with one of the founders.

Amusing

Economist Thomas Piketty, author of the best-selling “Capital in the Twenty-First Century,” turned down France’s highest award, the Legion d’Honneur.

He said it is not up to the government to determine who is honorable.

First draft of Nassim Taleb’s 2015 Resolutions (courtesy Business Insider)

1. Call someone who has no friends, just to say hello, letting the person know that you do not need him/her. Have coffee with lonely people twice a month.

2. Do not read more than one new book a week – if needed re-read (and read no book you wouldn’t reread.) Do not do write more than two hours a day. Walk two hours every day regardless of weather. Do not go the gym more than 5 times in any given month and/or do not spend more than 30 minutes per visit.

3. Fast one day every week on average. Eat meat only on festivals, but then splurge.

4. Respect the janitor more than the chairman and respect those who respect the janitor more than the chairman.

5. Do not read the latest breakthrough experiment in psychology about, say, the effect of taking cold showers on grammatical ability. Better even read nothing about these “experiments.”

6. Read no book written by, or co-authored with, a journalist.

7. Pick a lobbyist (preferably Monsanto/GMO) or some economist harmful to the collective and make life miserable for him, especially if the reaction entails some personal and reputational risks for you.

8. Give to someone who need money but doesn’t ask for it while finding an excuse to preserve his/her dignity.

9. Use courage and wisdom, not labor, to make money.

10. In the end realize that you are only as valuable as the risks you are taking for the sake of the collective.

Harry Newton. who’s alive and kicking this morning. No aches or pains. Vigorous exercise yesterday. Nice short naps. We visited the Matisse Cut-Out exhibit at MOMA (New York’s Museum of Modern Art). My favorite piece:

Sorry about the border. The exhibit is wonderful. Matisse was incredibly prolific. The MOMA exhibit runs until February 10. So you have time. Don’t miss it.